Hillshire Brands Co.

Oct. 1, 2012
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Corporate Profiles

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Spun off from Sara Lee in June 2012, Hillshire Brands is mostly comprised of the Sara Lee Corp.’s portfolio of processed meat brands such as Ball Park, Hillshire Farm, Jimmy Dean and State Fair. The company has $4 billion in annual revenues, 85% of which are in processed meats and 15% of which are in bakery. Three quarters of Hillshire’s revenues are generated through retail channels while the other 25% is food service.

Speaking in early September at the Barclays Back to School Conference, Sean Connolly, chief executive officer of Hillshire Brands, said the company’s growth model is based on three prongs.

“The first is to continuously strengthen our core,” he said. “This is something we haven’t done consistently in the past when we were part of a company that grew as big as $18 billion or $20 billion. Continuously strengthening the core is about minding the devil in the details of our core business. It’s about product quality upgrades. It’s about new news.”

Mr. Connolly said the second prong involves shifting the company’s brands into new market adjacencies.

“Think about Jimmy Dean,” he said. “From 1970 to 2000, it was a roll sausage business. It was a good one but it wasn’t doing much. And in the year 2000, we reframed that business, and so Jimmy Dean is really about convenient protein solutions in the breakfast day part.”

The company is now following a similar strategy with the Ball Park brand.

“… We’ve taken a brand in Ball Park that was always about refrigerated and always about hot dogs and we’ve reframed it to be Ball Park is about better guy food for better guy times,” he said. “So when you think about guy food, you should think about Ball Park. And you’ve seen us get Ball Park into things like flame grilled burgers and now into mini meals and snacking.”

The third growth prong involves acquisitions that support Hillshire’s strategy. In May 2011, Sara Lee acquired Aidells Sausage Co. for $87 million. Aidells is a manufacturer of gourmet sausages targeting the top-end tier of the sausage market, and the company gave Sara Lee and now Hillshire access to a new segment of the sausage market.

“It was perfectly incremental to our category,” Mr. Connolly said. “We’ll continue to, in a disciplined way, look for acquisition opportunities that round out our portfolio and give us additional strength with our customer as well as unleash some of the operating leverage in our asset base.”

Mr. Connolly described the meat snack category as emerging as consumer eating patterns continue to change.

“… As you look at the data and how consumers are eating, it used to be breakfast, lunch, and dinner across the board,” he said. “Now, 20% of consumer eating occasions are snacking. And even the main meals, which are dinner and lunch, tend to look more and more like mini meals. Why is that happening? It’s happening because people tend to graze throughout the day.”

He also identified two markets where Hillshire Brands will focus its innovation efforts — meat-centric meals and meat snacks. He described meat-centric meals as a $68 billion category that is growing and in which Hillshire only has a 4% share.